In China, Business is about Location, Location, Location! PART 4

Marc Sparks is an entrepreneur who has been involved in more than sixty start-ups since the Seventies. Marc is also the founder, owner, and CEO of Timber Creek Capital, a private equity firm. This is the fourth installment in a blog series titled China: The Land of Platinum Opportunity.

I knew a little bit about doing business in China from when I traveled to Beijing for the first time. While I was there, I had a craving for some Texas barbecue, which simply didn’t exist there.

I personally love to barbecue and smoke beef, chicken, pork, and fish regularly. I have friends who beg me to cook baby back ribs. When I had that craving for Texas barbecue, it occurred to me that there was an opening in the Chinese marketplace for such food. I had envisioned at least one hundred smoked barbecue locations in Shanghai and a hundred more locations in Beijing. I would call them Sparky’s BBQ (with a cowboy hat atop the “S”) as an ode to our beloved family dog, Sparky Sparks. The interior would be contemporary yet Western in design, and the walls would feature color posters of Texas longhorn cattle (we raise them on our ranch). Picture Chipotle Grill meets smoked barbecue. There would be no waitstaff, just a walk-up counter where patrons could get the best smoked pork ribs in the world. Of course our menu would have other choices, but the focus would be predominantly on the pork ribs wrapped in wax paper, so they would be easy to carry.

My vision included building a central smokehouse commissary where all the main dishes—the smoked pork ribs, brisket, chicken on a stick, and other delicious side dishes—would be prepared and then delivered fresh by truck to all of our Sparky’s locations each day. I’m a stickler about quality control, so this daily delivery approach would guarantee the consistency and quality of our smoked meats and eliminate the need for full-blown kitchens in every location.

I was so fired up that I spent over $150,000 doing my homework and due diligence. There is absolutely nothing like what I was proposing anywhere in China. I pictured Chinese people walking down busy streets eating Sparky’s pork ribs on the go. Our plan was to give the ribs away at certain times of the day to ensure that we hooked the locals on our delicacy.

As I started to develop this concept, I discovered some very interesting things about the Chinese culture that I hadn’t previously known. For example, Chinese people generally don’t eat white meat chicken—they simply discard the breast meat. They much prefer dark meat chicken wings, legs, and thighs. The Chinese also don’t eat a lot of beef because there isn’t a lot of contiguous space for cattle and ranches. Beef is primarily imported to China. When you drive through China, you see a lot of underdeveloped property, but there aren’t a lot of cattle ranches. Also, the mesquite wood we needed to smoke the meats would have to be shipped to China from the United States, as it simply didn’t exist there. But I wasn’t the least bit deterred by the obvious challenges. While it was clear that there were hurdles to get over, none of them seemed insurmountable at the time. I just heard the opportunity pounding on my door.

At the suggestion of some people who had done business in China, I quickly bonded with some Chinese associates to help me navigate this unchartered territory. I invited them to Texas to taste the kind of food I was talking about bringing to their country. They loved it. We were certain that if we could get the Chinese people to try smoked pork ribs, they’d immediately get hooked on them. Everything was crystal clear. All we needed was our first location.

Six months into the project, we were still without a single potential space. Every site we looked at—from new construction to already existing structures—had already been leased. The American style of doing business is to walk in the door, sign the contract, and get out. We employed CBRE, one of the largest and best commercial real estate brokers in the world, to help us locate our first retail restaurant space. I wanted that flagship location to be a really good one so the business would get off the ground in a grand way. I wasn’t worried about our commissary location just yet. Then reality set in. There were virtually no retail spaces available in either Beijing or Shanghai . . . and nothing was coming available in the foreseeable future. Where major cities in the United States might have three or four highway rings around them and shopping centers every three or four miles, Beijing has twelve highway rings around it, and if there isn’t a shopping center on the corner now, there most certainly will be soon. It’s insane! Nike, Izod, Jaguar, Chevrolet, McDonald’s, Mercedes, Cadillac, Ford, Taco Bell, KFC, Starbucks, Bentley, Rolls Royce, and many more familiar Western brands have acquired everything worth leasing, years in advance of construction. As far as I could tell, there was no prime real estate available anywhere. Sure, we could have had a third-floor spot in a mall with no street exposure or signage, but that wasn’t what we needed. I wanted a street-level location with lots of foot traffic.

To give you a sense of perspective, there are roughly thirty high-rise buildings in Dallas, 172 skyscrapers in New York City. At the end of 2004—nearly ten years ago—there were 6,704 buildings of eleven stories or more, completed since 1990, in Shanghai alone. The cities in China are designed for vertical living. People are used to going up, but I wasn’t used to the idea of opening a new concept restaurant in that environment. I had no choice but to pull the plug on the idea before spending any more time and money pursuing something that wasn’t likely to work.

I haven’t given up on my dream of doing business in China—there has to be a way to tap into that massive buying public.
Read more Marc Sparks’ insights at www.whoismarcsparks.com, his views on business and entrepreneurship at www.timbercreekcapital.com, and excerpts from his upcoming book, They Can’t Eat You, at www.marcsparks.com.